Solutia creditors committee objects to notes trustee's request for partial summary judgment

By Reshmi Basu

New York, Oct. 10 - Solutia, Inc.'s official committee of unsecured creditors decried the request by the senior secured notes trustee seeking a partial summary judgment that allows for the full amount of senior secured notes claims, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The noteholders' request for the full $223 million principal amount of the claim, plus damages, "far exceeds their economic bargain under the 2009 indenture," the unsecured creditors said in the objection.

Furthermore, the committee said trustee Bank of America has introduced a number of theories to inflate the claim - theories that fall short under scrutiny.

Under the indenture, the noteholders' claim consists of the principal amount of the 2009 notes, which is $181.7 million plus the original issue discount amount of $28.2 million, resulting in an allowed claim of no more than $209.9 million.

The creditors committee argued that it is ridiculous for the noteholders to ask the court to determine the amount of their claim as if a bankruptcy had never occurred because Solutia did, indeed, declare Chapter 11, which resulted in their rights to the payment under the 2009 indenture to be converted to a claim against the estate.

"The noteholders cannot now escape the consequences of bankruptcy," the creditor committee said in the filing.

In addition, the unsecured creditors refute Bank of America's argument that the change of control that would occur under Solutia's proposed plan of reorganization would give the noteholders the right to force Solutia to buy the senior notes back at a price equal to the change-of-control amount, or a minimum of $225.23 million, plus interest.

The creditors committee noted that the change of control would not happen until after the effective date of the plan, "at which point the plan is the operative document that will govern the noteholders' rights - not the 2009 indenture."

A hearing is scheduled for Oct. 26.

Solutia, a St. Louis-based manufacturer and provider of performance films, specialty chemicals and an integrated family of nylon products, filed for bankruptcy on Dec. 17, 2003. Its Chapter 11 case number is 03-17949.

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